Suppose the price of an item in a perfectly competitive market is $2. For a firm in this market, MC = MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that
A) the firm should shut down because TC > TR.
B) the firm should continue to produce because P>AVC.
C) the firm should shut down because its TFC is $320 and its TC is $400.
D) the firm should shut down because other firms will enter the industry as the market is perfectly competitive.
Answer: B
Economics
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